Trading Returns for the Weekend Effect Using Intraday Data

doi:10.1111/1468-5957.00113

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Wiley InterScience

Journal of Business Finance & Accounting

Volume 24 Issue 3, Pages 425 - 444

Published Online: 4 Mar 2003

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Trading Returns for the Weekend Effect Using Intraday Data

Edward H. Chow , Ping Hsiao & Michael E. Solt

¹ Department of Banking, National Chengchi University, Taipei, Taiwan, ² Department of Finance, School of Business, San Francisco State University, ³ Department of Accounting and Finance, San Jose State University

KEYWORDS

weekend effect • intraday observations • trading strategies • transactions costs • risk and return

ABSTRACT

The existence of the weekend effect has been documented as early as 1885. This paper examines whether the serial dependence in returns around weekends and the magnitude of negative Friday returns can be used to produce superior trading returns. We find some success for this endeavor after accounting for transaction costs (including the bid/ask spread), especially when trading is confined to weekends for which there are large negative Friday returns and to positions opened on Friday afternoons. The effect of stocks trading ex-dividend on Mondays does not appear to bias our results.

DIGITAL OBJECT IDENTIFIER (DOI)

10.1111/1468-5957.00113 About DOI